Page 22 - Accounting Principles (A Business Perspective)
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Accounting principles:A business perspective
ensure that the company's divisions and departments follow the policies and procedures of management. This last
group of management accountants may earn the designation of Certified Internal Auditor (CIA). The Institute
of Internal Auditors (IIA) grants the CIA certificate to accountants after they have successfully completed the IIA
examination and met certain other requirements.
Many accountants, including CPAs, work in governmental and other not-for-profit accounting. They
have essentially the same educational background and training as accountants in public accounting and
management accounting.
Governmental agencies at the federal, state, and local levels employ governmental accountants. Often the duties
of these accountants relate to tax revenues and expenditures. For example, Internal Revenue Service employees use
their accounting backgrounds in reviewing tax returns and investigating tax fraud. Government agencies that
regulate business activity, such as a state public service commission that regulates public utilities (e.g. telephone
company, electric company), usually employ governmental accountants. These agencies often employ governmental
accountants who can review and evaluate the utilities' financial statements and rate increase requests. Also, FBI
agents trained as accountants find their accounting backgrounds useful in investigating criminals involved in illegal
business activities, such as drugs or gambling.
Not-for-profit organizations, such as churches, charities, fraternities, and universities, need accountants to
record and account for funds received and disbursed. Even though these agencies do not have a profit motive, they
should operate efficiently and use resources effectively.
Approximately 10,000 accountants are employed in higher education. The activities of these academic
accountants include teaching accounting courses, conducting scholarly and applied research and publishing the
results, and performing service for the institution and the community. Faculty positions exist in two-year colleges,
four-year colleges, and universities with graduate programs. A significant shortage of accounting faculty has
developed due to the retirement beginning in the late 1990s of many faculty members. Starting salaries will
continue to rise significantly because of the shortage. You may want to talk with some of your professors about the
advantages and disadvantages of pursuing an accounting career in higher education.
A section preceding each chapter, entitled "Careers in accounting", describes various accounting careers. You
might find one that you would like to pursue.
Financial accounting versus managerial accounting
An accounting information system provides data to help decision makers both outside and inside the business.
Decision makers outside the business are affected in some way by the performance of the business. Decision makers
inside the business are responsible for the performance of the business. For this reason, accounting is divided into
two categories: financial accounting for those outside and managerial accounting for those inside.
Financial accounting information appears in financial statements that are intended primarily for external
use (although management also uses them for certain internal decisions). Stockholders and creditors are two of the
outside parties who need financial accounting information. These outside parties decide on matters pertaining to
the entire company, such as whether to increase or decrease their investment in a company or to extend credit to a
company. Consequently, financial accounting information relates to the company as a whole, while managerial
accounting focuses on the parts or segments of the company.
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